When you borrow money today, you are robbing your future self of funds you may need. And you may then perpetuate a debt cycle where you generate money by assuming more debt.
And as someone who has struggled with debt, I am not judgmental or pompous. The truth is that many of us start life with crushing, unimaginable debt without appreciating the long-term consequences.
Consider the unremedied scourge of student loan debt. Student loan debt is not bad within itself.
The problem is that young people become psychologically mired in a self-perpetuating debt cycle mindset before they even graduate.
Over 43.2 million Americans collectively owe over $1.7 trillion in student loan debt. The average American college student owes over $40,000 in student loan debt.
When students enter working life saddled with student loan debt, buying a car or house, rites of passage in achieving the American Dream become cost-prohibitive mirages.
The average cost of a new car is $40,000 – most Americans are now buying used cars in the aftermath of the pandemic.
And the typical price of a new house is $350,000.
What if I told you that, under qualifying conditions, several states would pay off your student loans if you moved there and bought a home?
Illinois Smart Buy Initiative
The typical cost of a house in Illinois $223,000. If you qualify for Illinois’ Smart Buy program, you may only have to worry about raising $180,000 of that estimate.
Smart Buy is a $25 million mortgage program initiative that is designed to help shed up to $40,000 in student loan debt if you buy a home in the state. If you qualify, you may get a 30-year fixed-rate mortgage and an additional loan for $5,000 at 0% interest.
The sweetener to this deal is the student loan forgiveness portion. A Smart Buy affiliated mortgage lender will pay off your student debt by $40,000 or a 15% equivalence of the home’s value, whichever is lowest.
To qualify for this program your credit score must be 640; you must live in the home for three years. And you can only apply the Smart
Buy program to a new home purchase. In other words, you cannot use this program retroactively for a home you already own or recently bought.
There are also income limit and home price limit qualifications relative to the Illinois city or county you plan to reside in – you can check that out here.
Maryland Mortgage Smart Buy
The average cost of a house in Maryland is $349,000. If you qualify for Maryland’s Mortgage Smart Buy initiative, then you will only have to raise $319,000.
Suppose you qualify for the Maryland Mortgage Smart Buy initiative. In that case, an affiliated mortgage lender pays off $30,000 of your student loan debt or discount 15% of the home’s value relative to that debt, whichever is lower.
However, one catch is that this student loan forgiveness is only viable if at least two borrowers apply. And at least one of you must have paid off all of your student loan debt before applying.
Consider Your Options
If you consider these are other student loan forgiveness programs via mortgage discount, always remember there are qualifications and limits. Even if you qualify, these programs won’t pay off all of your student loan debt if you owe more than $1,000 to $40,000, depending on the program.
Talk to a financial advisor if you are struggling with student loan debt.
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Allen Francis was an academic advisor, librarian, and college adjunct for many years with no money, no financial literacy, and no responsibility when he had money. To him, the phrase “personal finance,” contains the power that anyone has to grow their own wealth. Allen is an advocate of best personal financial practices including focusing on your needs instead of your wants, asking for help when you need it, saving and investing in your own small business.
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